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| Wholesale Line Rental: Oftel's conclusions - statement - 11 March 2003 | |
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Chapter 2 - WLR2 product description Chapter 4 - WLR2 process issues Chapter 5 - Capacity of BT's electronic gateway and forecasting Chapter 6 - WLR2 consumer issues Chapter 7 - WLR2 cost recovery Chapter 8 - WLR2 Assessment criteria Chapter 9 - WLR2 Implementation Annex A - Wholesale Line Rental Product Specification Issue No. 1 Annex B - Wholesale Line Rental Assessment Criteria and Process Summary1 Background S.1 Oftel’s 2001-2 review of the fixed telephony market concluded that BT has market power in the provision of both calls and access. One reason for this is BT’s ability to provide a bundled calls and access service, which provides BT with a significant competitive advantage over alternative service providers. S.2 In August 2002 Oftel modified BT’s licence to require it to provide a new ‘Wholesale Line Rental’ (WLR) product. This will allow alternative suppliers to rent access lines on wholesale terms from BT, and resell the access lines to the end-user, enabling the alternative supplier to provide a single bill that covers both line rental and telephone calls. In order to provide BT with an incentive to introduce WLR as quickly and fully as possible, Oftel indicated that it would relax the controls on BT’s retail prices (from RPI-RPI to RPI-0%) when it is satisfied that a ‘fit-for-purpose’ WLR product has been made available by BT and is being actively used by competitors. S.3 BT introduced a basic WLR product (WLR1) at the beginning of September 2002. However, it was recognised that WLR1 would need to be developed further if it was to be a ‘fit-for-purpose’ product in the mass market. Oftel published a consultation document on 14 November 2002, in which it set out its detailed proposals for WLR2. S.4 Oftel has received 29 responses to the WLR2 consultation document. This Statement summarises these responses, and sets out Oftel’s analysis and conclusions for the way forward for WLR2. 2 Product Specification S.5 Oftel set out in its consultation document the tests it proposed to apply in order to determine whether a particular wholesale input should be included within the WLR2 Product Specification. This Statement confirms these tests, and applies them to reach the following specific conclusions:
S.6 Oftel acknowledges that it has so far only determined charges for the transfer and rental of a basic analogue line. Oftel expects that BT will propose charges for other services early in the WLR2 implementation phase, as part of the commercial discussions with SPs. Oftel sets out in this statement the principles that it expects to be adopted by BT when setting these charges. The basic principle is that charges must be set in a manner that is consistent with any SMP obligations for cost-orientation and non-discrimination that are placed on BT under the new EU regime. S.7 Digital line types shall be excluded from the specification of WLR2 used for the fit-for-purpose test. Oftel remains of the view that this exclusion will have a material impact on SPs ability to address the business market, but acknowledges that it is unable to compel BT to accept the inclusion of digital line types within the current voluntary framework. The extension of regulation to digital line types must be based on a rigorous competition analysis, and Oftel will be addressing this requirement in the relevant market review (Review of the fixed narrowband wholesale exchange line, call origination, conveyance and transit markets, to be published in March 2003). S.8 FeatureNet and FeatureLine lines shall be excluded from the specification of WLR2 used for the fit-for-purpose test. A decision by Oftel to regulate these services would amount to a major extension of regulation into the VPN and Centrex markets, and this must be based on a detailed and rigorous competition analysis. Oftel has commissioned a study of this issue, and expects this study to be completed in spring 2003. S.9 There are a number of services that will not be included in WLR2, but which are provided over the same line. It is important that this does not create a barrier to the take-up of WLR2. Oftel notes that any service incompatibility with WLR2 will create a potential barrier, either directly, because it will result in a WLR2 order being rejected, or indirectly, because the need to strip the incompatible service can be exploited by BT as part of its ‘save’ process. Oftel therefore concludes that service incompatibilities must be minimised. S.10 Oftel has reached the following conclusions as to how certain specific services shall be handled:
S.11 Where a service incompatibility is unavoidable, Oftel will determine on a case-by-case basis which service takes precedence. In any case where a service incompatibility results in services being be stripped from an existing line, it is essential that the end-user is made aware. BT shall inform the end-user of the loss of any services using the mandatory ‘losing’ letter. It is also essential that the WLR SP is made aware of the loss of any services, so that they can properly manage their customers’ expectations. This notification should take place at the earliest possible stage of the ordering process, and certainly before the end-user is informed. S.12 Oftel will expect WLR SPs to provide access to a range of 118 DQ numbers. WLR SPs will not be expected to provide access to all 118 DQ numbers. Oftel will review this situation after 12 months. 3 Process Issues S.13 Much of the process design for WLR2 represents a set of compromises that are necessary between two fundamental considerations. On the one hand, the principle of equivalence states that SPs must have the opportunity to implement business processes that could deliver an equivalent quality of service to that delivered by BT Retail. On the other hand, it has been recognised that the initial launch of WLR2 will have to build on the functionality provided by the existing WLR1 and CPS ordering systems, and this constrains what can practically be achieved for WLR2. S.14 In order for WLR2 to be fit-for-purpose as a mass market product, it is essential that the ordering system is implemented in a highly efficient manner, that minimises transaction costs incurred by service providers. This Statement sets out Oftel’s conclusions in relation to a number of more specific requirements that follow from this:
S.15 This Statement sets out some specific requirements in relation to the combined ordering and provisioning processes for WLR2 and CPS:
S.16 Oftel recognises that a substantial amount of design work is still required on the general processes for the provision and transfer of WLR2 lines, as well as on a number of more specific processes to handle specific issues (e.g. home-movers). Oftel expects this work to form a key element of the WLR2 implementation programme. S.17 This Statement sets out Oftel’s conclusions in relation to the processes for the management of faults on WLR2 lines. These include:
S.18 This Statement sets out Oftel’s conclusions in relation to billing, debt management, fraud and security on WLR2 lines. These include:
S.19 This Statement sets out Oftel’s conclusions in relation to the handling of malicious calls. Oftel does not believe that it is practicable for WLR SPs to respond to malicious calls without a substantial degree of support from BT. BT shall therefore provide to SPs the same support for handling malicious calls that it provides to BT Retail. 4 System capacity, operational management and forecasting S.20 SPs will submit orders for WLR2 via an electronic Service Provider Gateway (SPG). The development and operational costs of the SPG and associated systems will make up a substantial proportion of the total costs for WLR2. These costs will be dependent on the volume of transactions. S.21 Oftel analyses in this Statement whether the SPG capacity currently planned by BT is likely to be sufficient. Based on a detailed top-down forecast of the market for WLR2, Oftel concludes that:
S.22 Oftel will review these forecasts on a regular basis. This will ensure that that any future need to upgrade SPG capacity is identified at an early stage, and will also ensure that the forecast is of use to BT as an input to its operational planning. Some changes will be required to the forecast methodology, in order to provide additional detail, and these changes are set out in this Statement. S.23 Whatever the SPG capacity, there is always a risk that it will be exceeded on a day-to-day basis. This Statement therefore sets out a process for rationing the available capacity in a transparent and efficient manner. Key elements of the process are:
S.24 The individual forecasts submitted by SPs are intended primarily as an input to the rationing process. BT may also have credit vetting processes, which may make use of individual forecasts by SPs. However, Oftel does not believe it will be necessary to use the SP forecasts as the basis for BT’s operational planning, since it expects this requirement to be met by the top-down forecast discussed above. 5 Consumer issues S.25 WLR2 is expected to encourage competition, and will therefore bring significant changes in the way that services are marketed to consumers. In view of previous experience in the energy sector, as well as with other telephony services such as CPS, Oftel believes that a number of consumer protection measures will need to be introduced alongside WLR2. These are set out in this Statement and summarised below. S.26 Consumers wishing to transfer between telephone companies shall receive a mandatory letter from both the gaining and losing telephone companies. These letters shall be restricted to neutral/factual information, with no ‘save’ or marketing content. There is some flexibility as to the precise format of these letters, as long as they conform to Oftel’s overall guidelines, and Oftel will be monitoring developments closely to ensure that this is the case. S.27 There shall be a standard switchover period of 10 working days (excluding Saturdays) for WLR2, irrespective of the method of sale. This is intended to provide sufficient time for the transfer letter to be received, considered and acted upon by the consumer. Oftel will consider in light of experience whether it is reasonable to review this period. S.28 Consumers will have the right to change their mind after any statutory cooling-off period, but before the switchover period is completed, and remain with their current provider, and not be subject to any form of financial penalty. The same applies to slamming, where this is detected before the switchover period is completed. Further work is required to consider the desirability of a fast-track reversion process, which would apply in cases where slamming is detected after the switchover period is completed. S.29 BT Retail provides some retail packages that are designed to meet social objectives in relation to vulnerable parts of the community (e.g. Light User Scheme). Oftel has considered whether enhanced consumer protection measures are required for such packages, which would prevent the line being transferred to a WLR SP without positive confirmation from the end-user. Oftel has concluded that exchange lines over which such services are provided shall be excluded from WLR2. If an SP submits an order for WLR2 on such a line, the order will be rejected by BT, and the SP will have to ask the end-user to cease LUS if they wish to transfer their line to that SP. S.30 Oftel will however keep this issue under review, based on early experience with the standard consumer protection measures for the WLR and CPS services. Oftel will also continue to consider, in discussion with stakeholders, whether the enhanced consumer protection that it believes to be required can be provided by some other means than is proposed here. To prevent the measure creating an unreasonable barrier to switching, Oftel proposes to review the guidelines for exiting special schemes. S.31 All SPs shall be required to have Codes of Practice, incorporating provisions that promote good practice and responsible sales and marketing for WLR2. Guidance on Codes of Practice has been published on Oftel’s website. Oftel will be updating its consumer guide on WLR2 and considering an appropriate distribution strategy with stakeholders ahead of launch of WLR2. 6 Cost recovery S.32 In setting the starting charges for WLR2, in its June 2002 statement, Oftel allowed for the reasonable costs of developing and operating the SPG, to the extent that these were known at the time the charges were determined. However, it now appears that the actual costs of WLR2 may differ from the amount allowed for in the line rental, and may be significantly greater. Oftel has therefore had to review its original proposals. S.33 This Statement sets out Oftel’s conclusions in relation to the recovery of BT’s costs for WLR2. These conclusions are based on two underlying principles:
S.34 Oftel will meet the requirement for proportionality by, where necessary, subjecting any proposed development to a Cost Benefit Analysis (CBA). Oftel notes, however, that it is likely to be in the best interests of BT and SPs to reach a consensus without Oftel intervention as often as possible, since formal intervention by Oftel in every element of the WLR2 programme is likely to be costly, time consuming and disruptive. S.35 The CBAs will be based on cost estimates provided by BT. Oftel expects BT to provide as much transparency of its analysis to SPs as is consistent with BT’s legitimate requirements for commercial confidentiality. Where SPs have concerns in relation to BT’s cost estimates, and commercial confidentiality prevents these concerns being addressed, then Oftel will review the cost estimates with BT. S.36 Oftel expects that each element of cost within the WLR2 programme will fall into one of three categories: system setup costs, per operator costs, and per line costs. Oftel has considered the appropriate cost recovery mechanism for each of these categories of cost, based on six principles of cost recovery. Oftel concludes that, as a general principle, system set up costs should be recovered from all BT retail customers and WLR service providers, whilst per operator and per line costs should be recovered from service providers alone. S.37 However, Oftel does not propose to modify the basic WLR2 line rental, established in the retail price control review in June 2002. This was a key element in the incentive package that was originally agreed by BT, and it would not be appropriate to attempt to renegotiate this now. It is therefore necessary to reconcile the existing line rental with the principles set out above, and this Statement sets out in detail how Oftel intends to do this. 7 Implementation programme and fit-for-purpose assessment S.38 The regulatory basis on which BT is implementing WLR2 is novel, in that BT has been offered an incentive to deliver this, in the form of the relaxation of retail price controls. This Statement sets out how Oftel intends to make its formal assessment of whether WLR2, as delivered by BT, is fit for purpose. S.39 Oftel’s assessment of WLR2 will combine a broad assessment of whether WLR2 as implemented is fit for purpose, with a preliminary assessment of the market impact. There are three main elements of this assessment.
S.40 Oftel expects to carry out its assessment of WLR2 at least three months after full product launch. The process will be triggered by BT, who will inform Oftel when it believes that it has met all the core requirements for the WLR2 product. This Statement sets out in more detail how the assessment will be managed. S.41 After this Statement is published, Oftel will continue to work closely with BT and with SPs on the WLR2 implementation programme. Oftel will use a set of milestones to monitor progress. This is necessary in order to provide an appropriate degree of visibility of BT’s implementation programme, as well as to manage interdependencies with SPs’ implementation programmes. S.42 Oftel reserves the right at any time to carry out a more formal project review, in order to determine whether the incentive regulation being applied by Oftel still seems likely to be successful, or whether alternative remedies to BT’s dominance of the relevant retail markets should be considered.
Chapter 1Introduction1.1 Background 1.1 Oftel’s 2001-2 review of the fixed telephony market concluded that BT has market power in the provision of both calls and access. BT continues to have a large share of both the calls and access markets, and makes very high returns on calls, well in excess of the level necessary to maintain a sustainable business. 1.2 The introduction of indirect access (IA) and carrier pre-selection (CPS) has resulted in a significant increase in the level of competition in the market for calls. However, IA and CPS do not allow alternative suppliers to provide access lines as well as calls. BT’s ability to provide a bundled calls and access service provides it with two forms of competitive advantage:
1.3 In August 2002 Oftel modified BT’s licence to require it to provide a new ‘Wholesale Line Rental’ (WLR) product. This will allow alternative suppliers to rent access lines on wholesale terms from BT, and resell the access lines to the end-user, enabling them to provide a single bill that covers both line rental and telephone calls. 1.4 In order to provide BT with an incentive to introduce WLR as quickly and fully as possible, Oftel indicated that it would relax the controls on BT’s prices (from RPI-RPI to RPI-0%) when it is satisfied that a ‘fit-for-purpose’ WLR product has been made available by BT and is being actively used by competitors. A relaxation of price controls is appropriate if the market for these services becomes more competitive, as competition should itself put downward pressure on prices. 1.5 BT introduced a basic WLR product (WLR1) at the beginning of September 2002. BT branded this product as ‘Wholesale Access’. This had similar functionality to the existing Calls and Access product, but with cost-oriented prices set by Oftel. However, it was recognized that WLR1 would need to be developed further if it was to be a ‘fit-for-purpose’ product in the mass market. 1.6 Oftel identified in June 2002 some essential features of an enhanced WLR product (WLR2). These included a highly automated ordering process capable of handling high transaction volumes, and seamless inter-working with Carrier Pre-Selection (CPS). Following further detailed discussions with industry, Oftel published a consultation document on 14 November 2002, in which it set out its detailed proposals for WLR2. 1.7 Oftel has received 29 responses to the WLR2 consultation document. These responses can be broadly divided into three groups:
1.8 This Statement summarises these responses, and sets out Oftel’s analysis and conclusions for the way forward for WLR2. 1.2 Structure of Statement 1.9 The majority of the respondents have provided answers and comments on some or all of the specific questions for consultation raised by the Consultation Document. These provide the bulk of the detailed commentary in this Statement and are treated in the same chapter headings (2 to 9) as in the Consultation Document. Oftel’s analysis, and its conclusions in relation to each issue, is set out in the relevant chapter. 1.10 In addition, many of the respondents have highlighted their summary of the main WLR2 and other related issues. These provide a top-level perspective with which it is useful to start this Statement (see Section 1.3 below). 1.11 Annex A of this Statement provides a more formal Product Specification, setting out the features and processes to be included in the WLR2 product. Oftel expects this Product Specification to form the basis for its fit-for-purpose assessment of WLR2. Annex B of this Statement sets out the assessment criteria that Oftel will use to determine whether WLR2 as implemented is fit-for-purpose. 1.3 Summary of Consultation Document Responses Overall 1.12 A majority of the responses refer to the good progress that has been made in recent months. Oftel welcomes this feedback. It is clear that there is still a lot to do before WLR2 is implemented and its benefits delivered, and Oftel is committed to continuing to work with the industry to ensure that all available resources are applied most effectively to achieve this. BT response 1.13 Having delivered WLR1, BT states that it remains committed to delivering a fit for purpose WLR2 product, the main elements of which could be available by October 2003. But BT expresses strong concerns in relation to many of the issues raised in the consultation. Key concerns relate to the general scope of the product, the specific inclusion of ISDN, and Oftel’s proposals for cost recovery:
1.14 BT notes that its agreement to work towards WLR2 was based on Oftel’s position as set out in the June 2002 statement. BT expresses concern that in the November 2002 consultation document Oftel is seeking to add new conditions to the requirement for WLR2. BT states that if this were to happen, then BT would be unlikely to implement WLR2 as envisaged, even though this would mean that BT would not then gain the benefits of moving to RPI+0. SP responses 1.15 As might be expected, the responses from SPs are in many respects diametrically opposed to those from BT. The most common concern is that the WLR2 package currently proposed does not offer full "equivalence of opportunity " between SPs and BT Retail. This leads a number of SPs to question the commercial viability of WLR2. Concerns are expressed in relation to three key areas, functionality, costs and process:
1.16 Some respondents have provided input on matters not directly covered by the consultation but nevertheless related to the WLR2 programme. The two main topics are current WLR1 and CPS process issues, and the application of the principle of equivalence to call conveyance charges:
Consumer groups and independent submissions 1.17 The focus of responses in this category is primarily on consumer protection issues. NCS Pearson also makes a number of observations on process issues, based on its extensive experience with CPS in other countries. 1.18 Based largely on ‘horror stories’ and other experience from the energy sector where end-users (especially the vulnerable) have been the victims of unscrupulous selling practices, the respondents emphasise the following points:
Oftel comments 1.19 Oftel has taken note of all the views expressed and the calls for further information and assurances from many respondents on a number of issues. 1.20 Oftel has taken note that some of the consumer groups felt quite strongly that there was insufficient time for them in the 1 month consultation period to adequately consult their membership in order to properly address the wide and important range of issues raised by WLR2. Oftel regrets this effect of the time constraint created by the programme timetable, and does welcome the primary consumer focus provided by those responses. Many of the organisations in question have been directly contributing during the WLR2 Task Group phase of work, and Oftel hopes that this previous and on-going involvement in finalising the WLR2 product will mitigate those concerns. 1.21 It is clear from the summaries provided above that there are a number of material differences between the WLR2 product asked for by SPs, and the product that BT is willing to provide. Nevertheless, Oftel believes that a careful analysis of each issue raised does yield a coherent set of proposals for the way forward. These are detailed in subsequent chapters. 1.22 Oftel notes the comments that have been made on process issues in relation to WLR1 and CPS. Oftel acknowledges that the WLR2 implementation programme will build heavily on work that is already underway for WLR1 and CPS. Outstanding process issues will therefore have to be considered as part of the WLR2 implementation programme. 1.23 Oftel notes the comments from some SPs in relation to the difficulty of using CPS to compete with BT Retail’s end-to-end call conveyance. This is clearly an important issue. However, it is also beyond the scope of this document, and so we do not discuss it further here.
Chapter 2WLR2 product description2.1 Background 2.1 BT Retail offers its customers a wide variety of different types of access line. In order to be able to compete effectively in the same market, an alternative Service Provider (SP) must be able to offer the same range and quality of services. 2.2 This does not mean that WLR2 should simply provide SPs with the wholesale equivalent of the same set of products offered by BT Retail to its customers. What it does mean is that the wholesale inputs available to SPs under WLR must create an equivalent opportunity, not just to duplicate the services offered by BT Retail, but to bundle those inputs in different ways in order to create new products. 2.3 These wholesale inputs can be divided into two parts. Firstly, the set of basic line types to be provided under WLR2; secondly, the set of supplementary services that can be applied to each line type, in order to provide different retail services. 2.4 This chapter reviews the range of analogue line types and supplementary services used by BT Retail, and then discusses which of these should be included in the WLR2 product. There is a distinct set of issues in relation to digital line types, and the discussion of these is consolidated into Chapter 3 of this statement. 2.2 General approach Oftel’s consultation document proposals 2.5 The principles adopted by Oftel in deciding whether a particular wholesale input should be provided are set out in general terms in the Access Guidelines (Imposing access obligations under the new EU Directives, Oftel, September 2002). In deciding whether a particular wholesale input should be included within the WLR2 Product Specification, Oftel proposed to apply the following more specific tests. These tests would be applied both to the existing sets of line types and line features, and to any new line types or features introduced by BT:
BT response 2.6 BT’s main concern was that ‘equivalence’ should not be interpreted as simply meaning replication of its systems and products for wholesale access. If too much of the value chain is provided through wholesale supply, then retail competition risks becoming simply a resale market, rather than an opportunity for innovation and differentiation. BT did accept that SPs should be able to enter into fair competition with BT on products and customer experience. 2.7 BT broadly supported the tests proposed by Oftel, but added that the inclusion of each line type and feature needs to be assessed on a case by case analysis of the detail. SP responses 2.8 For most SPs, the precise interpretation of the principle of equivalence was also the main issue. Most of the SPs broadly accepted Oftel’s proposed tests, but several concerns were noted:
2.9 SPs emphasised the importance of being able to offer a single bundle comprising all end-user services. The ability to replicate the bundles offered by BT Retail is a major driver behind the introduction of WLR2. All SPs therefore argued that they should have wholesale access to those line types and features for which there is reasonable demand. A small number of SPs went further than this, and argued that all lines and features should be included in WLR2 as a matter of principle, or proposed alternative principles that would be likely to result in the inclusion of almost all lines and features. 2.10 Several SPs noted the importance of timing. SPs argue that they must be able to launch equivalent features at the same time as BT Retail. This requires BT to make available to SPs early information on relevant products being developed for BT Retail. 2.11 Several SPs commented that they are not aware what the charge will be for those line types and features that are included. Nor are they aware of the principles and process to be adopted in setting these charges. Several SPs argue that these charges should be cost-oriented. Many SPs argue that whatever the charge is, it must apply to BT Retail as well as to themselves, and that this must be demonstrated in a transparent manner. Consumer groups and independent submissions 2.12 For this category of respondents, the high level product definition issues are limited to asking SPs to offer special services or packages such as for the disabled, equivalents to the Light-User Scheme, etc. The Telephone Helpline Association asks about packages that would suit the range of call patterns that its users typically have. 2.13 The single respondent who commented on the specific tests proposed believed that they were reasonable. Oftel analysis and conclusions 2.14 It is necessary to consider the issue of which services should be included in WLR2, and the related issue of how charges for these services should be set. Inclusion of services in WLR2 2.15 Oftel believes that the tests as proposed are reasonable, and provide an appropriate framework for considering whether a particular line type or feature should be included in WLR2. Interpretation issues will be resolved as the tests are applied in practice. In any case, some degree of flexibility is required in order to ensure that the outcome is proportionate. For example, it may be proportionate to require a legacy service to be made available on transfer terms (i.e. when an end-user already has the service), but not proportionate to require it for new provision. 2.16 Oftel does not believe that it would be proportionate to require all line types and features to be made available as a matter of principle. Oftel does however recognise the concern expressed by SPs regarding their need to be able to replicate the service bundles offered by BT Retail. The unavailability of a particular line type or feature could have a material impact on competition, even if the absolute level of demand is low, if it forms an essential element of a particular service bundle. Oftel will take this service bundle issue into account on a case-by-case basis. 2.17 Oftel acknowledges that it may be difficult for SPs to assess the level of demand for a particular line type or feature, given the lack of knowledge of the installed base. BT has provided Oftel with information on the take-up of most line types and features discussed in the consultation document, and Oftel has taken this information into account when assessing the case for inclusion in WLR2. 2.18 Oftel acknowledges that when BT Retail launches a new service, then consideration must be given to the inclusion of a wholesale equivalent in WLR2. This does not however mean that there must automatically be a wholesale equivalent of every service provided by BT Retail. Oftel expects the three tests summarised above to apply to new services as well as to existing services. 2.19 Oftel acknowledges the importance of an early decision regarding the availability of new wholesale services. As noted in the Access Guidelines (Para. 3.12, Imposing access obligations under the new EU Directives, Oftel, September 2002) BT will need to consider its obligations to provide access on non-discriminatory terms when it intends to launch a new retail service, and has been designated as having SMP in an associated wholesale market. Under the new regulatory regime, such an operator must ensure that, when launching a retail service, it is in a position to meet all reasonable requests for corresponding wholesale products. If this is not the case, the enforcement of the non-discrimination obligation may mean that the SMP operator, in order to comply with its obligation, may have to withdraw the related retail product. Charges for WLR services 2.20 Oftel acknowledges that it has so far only determined charges for the transfer and rental of a basic analogue line. It would have been impractical for Oftel to set charges for the full range of line types and features that are expected to be available within WLR2. Oftel does however expect that BT’s proposed charges will be tabled early in the WLR2 implementation phase, as part of the commercial discussions with SPs. 2.21 The basis for setting a charge for a WLR2 service will vary, depending on which wholesale market that service is in, and the competitive conditions in that wholesale market:
2.3 Line types Oftel’s consultation document proposals 2.22 Oftel proposed in its consultation document that single and multiple analogue lines should be included in WLR2. Where appropriate, residential and business variants of each line type should be made available. 2.23 Oftel reviewed a number of specific special line types provided by BT Retail. These included private payphone lines, NHS lines, temporary lines, out-of-area lines, low-loss exchange lines, non-served premises, ships-in-dock, FeatureNet and FeatureLine. Oftel concluded that special line types should only be included if significant demand exists. 2.24 Oftel proposed that private payphone lines should be included within WLR2. Oftel invited views as to whether the meter pulse facility associated with some such lines should be included in WLR2. BT response 2.25 BT’s position is that all the basic analogue line types are already in WLR1 and will be included in WLR2. All special line types are by default excluded from WLR2 unless significant demand can be proven. SP responses 2.26 All respondents supported the inclusion of the basic analogue line types in WLR2, and some SPs argued that by default all special line types should also be included. 2.27 Many SPs commented on the need to include specific special line types. Most references were to the inclusion of FeatureLine and FeatureNet. One SP argued that business users require these services and have no truly equivalent alternative supply to BT. A number of other SPs pointed out that FeatureLine is available in CPS and that significant demand has already been demonstrated in that context. 2.28 Particular SPs mentioned a variety of other specific line types as potentially having significant demand. These included payphone lines, NHS lines, temporary lines (and ships in dock), out of area lines, and low loss exchange lines. 2.29 One respondent did not believe that meter pulse was needed in WLR2, but five SPs supported its inclusion for reasons varying from wanting the facility, being aware of applications that require it, extending its current inclusion in WLR1 to WLR2, and believing it should be included if there is demand or until the facility is phased out altogether. Consumer groups and independent submissions 2.30 The single respondent mostly agreed with the proposals and pointed out the need for regular review. Oftel analysis and conclusions 2.31 The way forward is clear for basic analogue line types. These are already included in WLR1, and their inclusion in WLR2 is uncontentious. The situation in relation to the other line types is discussed in more detail below. FeatureNet / FeatureLine 2.32 Of the special line types, most of the concerns expressed by SPs relate to the inclusion of FeatureNet and/or FeatureLine in WLR2. These are the platforms used by BT to provide VPN and Centrex services to the business telephony market. Oftel certainly acknowledges the importance of alternative suppliers being able to offer VPN and Centrex-like services to the business market. However, a decision by Oftel to regulate VPN and Centrex services would amount to a major extension of regulation, and into markets that have hitherto been seen as potentially open to competition. 2.33 A number of complex issues need to be considered before taking such a decision. These include:
2.34 Oftel acknowledges that the supply-side substitutes to FeatureNet and FeatureLine do not provide precisely the same functionality as FeatureNet and FeatureLine, nor do they necessarily provide an equivalent cost base. However, Oftel believes that further analysis is required in order to determine whether any differences are material, and hence determine whether the inclusion of FeatureNet and/or FeatureLine in WLR2 would be proportionate. 2.35 Oftel notes the comments made by SPs in relation to the availability of FeatureNet and FeatureLine in CPS. However, the situation is somewhat more complex than has been suggested. Whilst it is true that there has been significant take-up of CPS using FeatureLine, it has so far not proven possible to launch CPS using Featurenet, due to a lack of operators interested in trialling this service. 2.36 Oftel has commissioned a detailed study of the FeatureNet / FeatureLine issues, and expects this study to be completed by spring 2003. Oftel will then need to consider how to implement any recommendations. These line types will not be included in the Product Specification for WLR2, and will therefore not form part of the fit-for-purpose assessment of WLR2. Other special line types 2.37 Oftel has applied the three tests set out at above in order to determine whether each of the other special line types should be included in WLR2. In doing so, Oftel has taken into account usage data supplied by BT. Oftel has also taken account of the bundling effect discussed above, which means that the unavailability of a particular line type could have a material impact on competition, even if the absolute level of demand is low, if the line type forms an essential element of a particular service bundle. Oftel’s conclusions are as follows:
2.38 The only change to Oftel’s consultation document proposals is the inclusion of out-of-area lines. Note however that Oftel does not expect that order volumes will be high, and it should therefore be sufficient for SPs to be able to order out-of-area lines using a manual process. If the cost of developing such a manual process proves disproportionate, then Oftel will review its decision to include out-of-area lines in WLR2. 2.4 Select Services Oftel’s consultation document proposals 2.39 A particularly well-known group of services are the Select Services, provided to allow end-users to manage their calls. Capabilities provided to the end-user include the ability to identify who is making a particular call, prevent unwanted calls, and ensure that calls that are wanted get through. 2.40 The Select Services have high profiles in both the residential and business markets. They form the basis of much of BT Retail’s product differentiation, especially between residential and business variants of the same line type. Oftel was therefore of the view that an SP attempting to compete with BT Retail must have available the full range of Select Services. 2.41 Most of the Select Services can only be provided by BT, due to the degree of dependence on BT’s access network. Oftel proposed that these services should therefore be included within the WLR2 product. Oftel provided in Annex A of its consultation document a detailed table setting out which select services were required for each line type, and which should be chargeable. BT response 2.42 BT’s position is that the majority of analogue select services are already in WLR1 and will be included in WLR2. In response to the detailed proposals set out in Annex A of the consultation document, BT provided its own table detailing whether specific select services are included or not. There was no comment on the Oftel proposals relating to how select services would be charged. SP responses 2.43 Since Oftel’s position was to include all relevant select services in the appropriate line type, SPs in general did not comment in detail beyond agreeing with the Oftel proposals. Some SPs repeated the case for all BT select services to be included in WLR2 in order to offer end-users a complete single bill service, and to avoid BT retaining a billing relationship with the end-user. 2.44 Two SPs asked about the availability of a wholesale and unbranded equivalent to the BT Answer voice messaging service, citing their concern that Call Mapping is not a viable basis to provide an equivalent substitute service. Consumer groups and independent submissions 2.45 The single respondent supported the proposals but noted with concern the high degree of dependency on services provided by BT. Oftel analysis and conclusions 2.46 Oftel remains of the view that the complete set of analogue select services should be included in WLR2, due to their high profiles in both the residential and business markets, and due to the fact these can only be provided by BT. 2.47 Oftel can confirm that BT will be providing a wholesale and unbranded version of BT Answer, known as Wholesale Messaging. 2.5 Other End-user Services Oftel’s consultation document proposals 2.48 In addition to the core set of Select Services described above, BT offers a number of related services over PSTN lines. The status of those services of which Oftel is aware is summarised below. 2.49 There are a number of PSTN lines on which BT Retail provides rented Customer Premises Equipment (CPE). This can range from single line telephones to PBXs rented to business customers. They may include some legacy hard-wired apparatus. Oftel proposed in its consultation document that:
2.50 Direct Dialling In (DDI) is a service which allows individual extensions on a PBX to be directly contacted via their own number. DDI can be supported by multiple analogue lines, as well as by basic and primary rate ISDN. Oftel argued that the DDI service is essential in order to allow SPs to compete in the business market, and proposed that it should be included within the WLR2 product. 2.51 Number Portability allows an end-user transferring between SPs, whether using BT’s network or not, to retain its number. The provision of number portability is a regulatory requirement and so remains part of WLR2. 2.52 SPs have suggested that BT Retail might be able to use a ‘golden numbers’ service as a means to attract new customers, by allowing end-users to select a favoured number from a list of available numbers. Oftel proposed that, if BT Retail provides this service to its customers, SPs should be able to do the same to ensure that they are not at a competitive disadvantage. 2.53 BT Direct Connect allows for the immediate automatic routing of calls to a pre-programmed telephone number as soon as the handset is lifted. Oftel proposed that this service be excluded from WLR2. 2.54 Network Call Performance provides detailed information on all calls made on analogue and digital lines, including the volume of calls receiving the engaged tone, the number of calls going unanswered and the time taken to answer successful calls. Oftel has been informed that the data for this service is not collected by BT’s local exchanges, but by the CPE on a business site. Oftel therefore proposed that this service be excluded from WLR2. 2.55 BT provides a charge advice service, under which customers are contacted on completion of each call, and provided with a voice announcement indication of the call cost. It would clearly be inappropriate for BT to advise end-users on the call charges being made by a WLR SP, and Oftel therefore proposed that this service be excluded from WLR2. 2.56 BT offers a temporary transfer and call interception service. Oftel proposed that this does not need to be included within the WLR product, since an SP wishing to provide a similar service should be in a position to use the standard call diversion facility, with their own call interception service. 2.57 Night-busying provides an end-user with the ability to set chosen exchange lines so that incoming calls receive a ‘busy’ tone. Oftel proposed that this service be excluded from WLR2. 2.58 BT Retail offers end-users a bypass number facility. Oftel proposed that this be included within WLR, bundled where appropriate with other select services. BT response 2.59 BT expressed strong opposition to Oftel’s proposal on the transfer to SPs of rented CPE. BT argues that telephony equipment is an open and separate market from the access line market, and that there is nothing to prevent SPs offering their own services. Where BT rents equipment to domestic and business customers it does so under a separate contract. 2.60 BT is prepared to make DDI for analogue lines available to SPs as a chargeable option. 2.61 BT will support number portability. On golden numbers, BT have accepted the need for equivalent treatment of SPs and BT Retail end-users, and will be developing proposals for such a procedure. 2.62 BT Retail no longer offers bypass number as a stand-alone service. This service is only available bundled with call barring or call diversion. The volumes are very low and BT argued that it should not be required to provide this on a wholesale basis unless there is reasonable demand. 2.63 BT clarified that it does not offer a temporary transfer and call interception service in relation to malicious calls, as suggested by Oftel in the consultation document. 2.64 BT had no further comment on other end-user services. SP responses 2.65 A number of SPs generally agreed with all of Oftel’s proposals, a majority agreed on those services to be included, but some were concerned about those services which would either be excluded or for which significant demand needed to be demonstrated. 2.66 On rented CPE, most SPs supported Oftel’s proposal. One SP suggested that the SP could also purchase the CPE, or the contract with BT could be ceased. Another suggested that a business end-user with a large CPE could have the option to pay rental to either BT or the SP. One SP was concerned that BT could take advantage of its on-going CPE relationship with the end-user to the detriment of the SP. 2.67 On temporary transfer and call interception, some SPs commented that in view of the emergency nature of malicious calls that BT is best equipped to handle the situation and should provide the same assistance to SPs as it does to BT Retail. This service should be included in the wholesale line rental charge. 2.68 A number of SPs were concerned at the possible exclusion of Direct Connect, Network Call Performance, charge advice and night busying. They argued that it is very hard for them to demonstrate significant demand for these services, but that their exclusion does give BT Retail the advantage of being able to offer a service which SPs cannot easily or cost effectively reproduce. Consumer groups and independent submissions 2.69 The single respondent concurred with Oftel that there is no reason to include products that SPs can offer independently but that at the same time SPs should not be disadvantaged. Oftel analysis and conclusions 2.70 On rented CPE, Oftel remains concerned that, if BT continues a billing relationship with end-users for CPE, then this might undermine the effectiveness of WLR2. On a more practical level, Oftel also has some concerns about the implications for fault management of having CPE and the access line leased from different service providers. It is frequently claimed that it is difficult to identify whether a fault arises from CPE or from an access line, and having the two provided by a different supplier is likely to add complexity to fault management processes. 2.71 However, Oftel acknowledges that this issue was not addressed in its original proposals, and so Oftel accepts that it cannot include this as a requirement for WLR2. Oftel therefore accepts BT’s proposal that rented CPE should be stripped off an access line, and billed separately to the end-user. 2.72 Oftel notes that BT is willing to make available DDI on analogue lines, as proposed in the WLR2 consultation document. 2.73 Oftel also notes BT’s agreement to provide full support for number portability. 2.74 On golden numbers, Oftel has clarified with BT that BT Retail does not currently have any process whereby its end-users are able to choose special numbers. BT has accepted the need for equivalence in this area, and should any such process be developed in future it will be offered equally to both BT Retail and the SPs. 2.75 On BT Direct Connect, Oftel agrees with the SPs who have argued that this could be an important service in some parts of the business market. Oftel acknowledges that SPs need to be able to offer an equivalent product in order to offer the same range of service bundles as BT Retail. However, Oftel is of the view that SPs can offer an equivalent service using CPE with an autodialler in conjunction with a standard access line. Oftel therefore remains of the view the Direct Connect should not be included within WLR2. 2.76 Oftel has also reviewed its original proposals in relation to the inclusion of Network Call Performance, charge advice, temporary transfer and call interception, and night busying. Oftel remains of the view that these should not be included within WLR2. 2.77 Oftel notes that BT no longer provides bypass number as a standalone service. Oftel accepts BT’s proposal that this should only be available on a wholesale basis when bundled with call barring or call diversion. 2.6 Legacy Services Oftel’s consultation document proposals 2.78 A number of legacy services (e.g. Remote Call Forwarding, Call Transfer) are still on BT’s retail price list. The functions provided by these services are now provided by more modern equivalents (e.g. Smart Divert) and Oftel proposed that these legacy services should not be included in WLR2. BT response 2.79 BT accepted Oftel’s proposal. SP responses 2.80 A number of SPs agreed with Oftel’s proposal or were not aware of any legacy service for which significant demand exists. 2.81 But other SPs expressed some concerns, for example that BT Retail might pay less for a legacy service than a SP for its modern equivalent, or that BT could revive a retail legacy service offering at a cheaper rate than SPs. As a result, some SPs asked for a clear list of legacy services no longer available for new provision and for their modern alternatives to be available in WLR2. 2.82 One SP asked for the switch based Remote Call Forwarding service to be retained, as the modern equivalent does not offer the same functionality in certain specific circumstances. 2.83 Another SP pointed out that a WLR transfer order should not be rejected due to the presence of a legacy product, instead that product should be seamlessly stripped. Consumer groups and independent submissions 2.84 The single respondent was not aware of any legacy service for which significant demand exists. Oftel analysis and conclusions 2.85 Oftel remains of the view that, where the functions provided by a legacy service are provided by more modern equivalents, it is not necessary for the legacy service to be available in WLR2. 2.86 Oftel notes the concern expressed by one SP that Remote Call Forwarding does not have a modern equivalent that provides the same functionality. Further analysis is required to determine whether any differences between Remote Call Forwarding and its modern equivalent are material, but if they are, then Remote Call Forwarding should be included in WLR2. 2.7 Network Services Oftel’s consultation document proposals 2.87 Oftel proposed that BT Wholesale should offer a variety of services as part of the WLR2 product in order to allow SPs to manage their network, and their customer base. These services are summarised below. 2.88 Call Mapping enables third party service providers to offer a Voice Messaging service to BT fixed single line end-users with network features equivalent to those of the BT Call Minder service. This includes a special Proceed Indication, and control of ringing duration prior to diversion. For more detail, see BT Suppliers Information Note 287. 2.89 Outgoing Call Barring is a service that prevents outgoing calls from a specified line. This prevents end-users who have not paid their bills increasing their level of debt, but is not as extreme as disconnecting them. 2.90 Indirect Access (IA) Call Barring is a service that will allow SPs to prevent end-users making IA calls (including the use of the 1280 CPS over-ride code). Oftel believes that the requirement to provide indirect access services should be applied only to operators that have Significant Market Power in the relevant market. In the national markets for access and calls, this is BT. Oftel’s view is therefore that service providers using the WLR service should not be obliged to allow their retail customers to choose to route their calls via an alternative IA operator. 2.91 Oftel views optional IA Call Barring as an essential element of the additional competitive offering that WLR2 should provide. Oftel is aware that some service providers would prefer not to allow their customers to have a choice to route calls via alternative operators. They argue that they need to guarantee that they will receive the customer’s call income if they are going to be able to offer innovative tariffs, such as lower price fixed elements being subsidised by higher price variable elements. 2.92 Nevertheless, Oftel believes it is important that customers who will not have the ability to make IA calls be made aware of this when they choose a new SP. Oftel proposed that when a WLR SP sends a welcome letter to the customer during the switchover period the SP must make clear if IA is not to be provided. In addition, Oftel’s Consumer Guide to WLR2 will make clear that the availability of IA is an issue that a prospective WLR customer should consider. These proposals are discussed further in Chapter 6. 2.93 The calls affected by IA Call Barring will be all calls that are made to "Type B" codes used for Indirect Access on a list maintained by Oftel. Calls made to any number on this list will result in a generic recorded announcement provided by BT. IA Call-barring will be optional: SPs will be able to determine on a per-line basis whether this capability is enabled. There will also need to be an option for SPs to add IA call-barring to, or remove it from, a line that is already subject to WLR2. 2.94 Route 15X to Service Provider is a service which diverts customer service calls to the relevant department of the SP. BT Retail has well-recognised numbers for residential customer service (150), business customer service (152), residential fault reporting (151) and business fault reporting (154). Under WLR2, BT will translate these numbers to an appropriate number provided by the SP, and route calls accordingly. Oftel believes that this is an important customer service facility given the potential impact on WLR SPs’ ability to offer a customer experience that is competitive with BT. Oftel therefore proposed that this service be made available to SPs by BT. 2.95 Route to Credit Control is a service that allows SPs to manage end-users who have not paid their bills. A line on which this service is activated will continue to receive incoming calls. It would also be possible to continue making calls to an allowed set of numbers (112, 999, 1471, 0800, 0500, 0808, 15x). However, calls to all other numbers (including CPS calls) would be routed to the credit control department of the SP. Oftel believes this is an important customer service and debt management facility which BT should provide in order to provide equivalence with the facility provided to BT Retail. BT response 2.96 BT responded that Outgoing Call Barring (OCB) is already in WLR1 and hence will be in WLR2. Call Mapping is also already available, and will continue to be available. 2.97 BT will also offer Route to Credit Control in WLR2 as a chargeable option. 2.98 However, BT is opposed to including Indirect Access (IA) Call Barring because end-users should retain the choice of access to all competitive offerings. 2.99 BT is also opposed to including Route 15x to Service Provider, arguing that the industry should promote non-geographic numbers (e.g. 0800) as the primary way of accessing customer service. Also, some end-users with an SP may retain other services with BT and will want to retain the ability to reach BT customer service using 15x. To help end-users who erroneously get through to BT’s 15x services, BT would be willing to hold lists of SP published customer service numbers. 2.100 BT also commented that although it has commented on feasibility and costs for some of these network services, it does not consider their inclusion in WLR2 to be a fit for purpose requirement. SP responses 2.101 For all the proposed services other than IA Call Barring, all the SP respondents supported Oftel’s proposals. On Route 15x to Service Provider, two SPs had questions about how the routing will be implemented and how the calls will be charged (bearing in mind that 15x calls are free to BT Retail end-users). 2.102 But there were mixed SP views on IA Call Barring. Many supported the Oftel view, emphasizing that a SP business case would be undermined without the option of IA Call Barring and agreeing that end-users who switch need to be made aware of it. However, one SP was unconvinced about the demand for IA Call Barring in view of the costs. And one SP argued that IA Call Barring may be illegal, quoting an EU Directive and arguing that it would be detrimental to IA providers and UK end-users generally by reducing competition and choice. Consumer groups and independent submissions 2.103 The two respondents both supported Oftel’s proposals, emphasizing that it is essential for end-users to be made aware of IA Call Barring. Oftel analysis and conclusions 2.104 Oftel has noted the input from BT in particular, but believes that the way forward is to leave its proposals unchanged. 2.105 In the case of "IA Call Barring", Oftel remains of the view that the requirement to provide indirect access services should be applied only to operators that have Significant Market Power in the relevant market. Oftel has previously argued that alternative operators will be less likely to develop innovative tariffing structures if they are unable to apply IA call barring. This would not benefit competition. Oftel does however recognize the importance of ensuring that customers who will not have the ability to make IA calls are made aware of this when they choose a new SP. 2.106 In the case of "Route 15X to Service Provider", Oftel does support BT’s suggestion that the industry should promote non-geographic numbers (e.g. 0800) as the primary way of accessing customer service. This is already happening: for example, fault reports for a fixed line are commonly reported via a mobile phone using a non-geographic number. This does not however remove the need also to implement "Route 15x to service provider", due to the high consumer awareness of 15x numbers. 2.8 Service incompatibilities Oftel’s consultation document proposals 2.107 There are a number of services which Oftel does not expect to be provided as part of WLR2, but which are provided over the same line. In such cases it is necessary to understand whether these services are compatible with the WLR2 product, and if not, how this incompatibility is handled. 2.108 One important category of services are those which are provided over the same copper loop used by analogue PSTN telephony, but in a different frequency band. Obvious examples are BT’s Wholesale DSL service, and the Redcare alarm monitoring service. Oftel proposed that analogue WLR2 should be able to co-exist with these services. 2.109 There will be some BT lines which have been taken over by an OLO under the terms of Local Loop Unbundling. Such lines clearly cannot be made available under WLR. Oftel noted however that trials of line-sharing are currently underway, and this is intended to allow an OLO to take over only the high frequency portion of a copper loop. If these trials result in a line-sharing variant of the LLU product being made available, then Oftel proposed it should be compatible with WLR2. 2.110 BT Chargecard allows end-users to make direct-dialled calls from any BT phone, using an account number and PIN number. The call is then charged to the user’s own directory number. Oftel understood that use of BT Chargecard is likely to be incompatible with WLR, and Oftel therefore proposed that this service be automatically stripped off any line transferred to WLR2. 2.111 BT Ring Me Free allows end-users to pay for selected incoming calls. End-users are allocated a 12-digit personal code, which they can provide to their friends and relatives. The person placing a call dials a 5 digit access code, followed by the personal code, and the call is then routed to the correct destination. Oftel understood that use of BT Ring Me Free is likely to be incompatible with WLR, and Oftel therefore proposed that this service be automatically stripped off any line transferred to WLR2. 2.112 BT Retail provides a variety of other retail bundles which combine an access line with appropriate call handling services. Examples include the Surftime internet access product, and the NetChat VOIP service. Oftel understood that end-users transferring to a WLR SP cannot continue to receive these retail services, and Oftel therefore proposed that they will automatically be stripped off any line transferred to WLR2. BT response 2.113 BT agreed with Oftel’s proposals, but believes that end-users should be made fully aware (via the advice of transfer letter or courtesy call) of which services will be stripped on transfer, as they could be of particular value to the end-user. SP responses 2.114 The majority of respondents agreed with Oftel’s proposals, but many made additional observations. 2.115 Two SPs pointed out the importance for SPs of being fully advised of which services will be stripped and what alternative substitute services might be available, in order to properly manage the end-user’s expectations. 2.116 Three SPs had concerns about ensuring that BT does not exploit the presence of services to be stripped, by using minimum contract periods or other terms to raise charges or restrict the end-user’s ability to switch, or by inappropriately emphasising in the advice of transfer letter the services which the end-user will be losing. 2.117 Two SPs felt strongly about improving options for the Chargecard service. With 5 million Chargecard users, a wholesale Chargecard variant should be offered in WLR2, or it should be possible to transfer it to a retail credit card variant which BT already offers. As a minimum, if the end-user wants to retain its Chargecard service, it must be transferred to a new separate CSS account. 2.118 Two SPs had particular concerns and questions about the implications of stripping services such as Surftime on billing, routing, and network efficiency. Consumer groups and independent submissions 2.119 Both respondents agreed with Oftel’s proposals, one emphasised that end-users should be made fully aware of which services will be stripped on transfer. Oftel analysis and conclusions 2.120 Oftel’s primary objective is to ensure that the presence of multiple services offered over the same exchange line does not create a barrier to the take-up of WLR2. Any service incompatibility with WLR2 creates a barrier, either directly, because it will result in WLR2 orders being rejected, or indirectly, because the need to strip the incompatible service can be exploited by BT as part of its ‘save’ process. Oftel therefore concludes that service incompatibilities must be minimised. 2.121 The specific services discussed here fall into one of three categories. The first category of services are those services provided over the same copper loop used by analogue PSTN telephony, but in a different frequency band | |||||||
